LegCo Paper No. CB(1) 1482/96-97
(These minutes have been seen
by the Administration)
Ref : CB1/PL/TP/1

LegCo Panel on Transport

Minutes of special meeting held on Thursday, 13 March 1997, at 4:30 pm in Conference Room A of the Legislative Council Building

Members present :

    Hon Mrs Miriam LAU Kin-yee, OBE, JP (Chairman)
    Hon Zachary WONG Wai-yin (Deputy Chairman)
    Hon LEE Wing-tat
    Hon CHAN Kam-lam
    Hon CHEUNG Hon-chung
    Hon LEE Kai-ming
    Hon TSANG Kin-shing

Members absent :

    Hon Mrs Selina CHOW, OBE, JP
    Hon Edward S T HO, OBE, JP
    Hon Albert CHAN Wai-yip
    Dr Hon Samuel WONG Ping-wai, OBE, FEng, JP
    Dr Hon Philip WONG Yu-hong
    Hon CHAN Wing-chan
    Hon CHOY Kan-pui, JP
    Hon Albert HO Chun-yan
    Hon LAU Chin-shek
    Dr Hon LAW Cheung-kwok
    Hon NGAN Kam-chuen
    Hon SIN Chung-kai
    Hon Lawrence YUM Sin-ling

Public officers attending:

    Transport Branch

    Miss Nancy LAW, JP,
    Deputy Secretary for Transport

    Mr Allan CHOW,
    Principal Assistant Secretary for Transport

    Finance Branch

    Mr Martin Glass,
    Deputy Secretary for the Treasury

    Miss Victoria TANG,
    Principal Assistant Secretary for the Treasury (Investments)

    Transport Department

    Dr Ernest LEE, JP,
    Acting Deputy Commissioner for Transport

    Mrs Judy LI,
    Principal Transport Officer

    Mrs Iris WONG,
    Senior Treasury Accountant

    Highways Department

    Mr Norman MAK,
    Chief Engineer/Kap Shui Mun

Attendance by invitation :

    BZW Asia Limited

    Mr Robert Montanari,
    Assistant Director, Investment Banking

    Mr Wallace T C FOO,
    Assistant Manager, Investment Banking

Clerk in attendance :
    Ms Estella CHAN,
    Chief Assistant Secretary (1)4

Staff in attendance :
    Mr Matthew LOO,
    Senior Assistant Secretary (1)4 (Acting)

The Chairman reminded members that the next meeting was scheduled for 14 March 1997 at 8:00 a.m. In addition, Sir Wilfrid Newton, ex-chairman of the Mass Transit Railway Corporation and the London Transport, would brief members on the success and failure of mass transit railways at a special meeting on 19 March 1997 after the meeting of the Bills Committee on Railways Bill.

I.Toll levels for the Lantau Link

(Paper No. CB(1) 1050/96-97(01) -- Concerns raised by members at the meeting on 3 March 1997

Paper No. CB(1) 1050/96-97(02) -- Response of the Administration to CB(1) 1050/96-97(01))

2.At the Chairman’s invitation, the Deputy Secretary for Transport (DS for T) briefed the Panel on the Administration’s response to concerns raised by members at the last meeting. In particular, she pointed out that the Internal Rates of Return (IRR) for the Tsing Ma Control Area (TMCA) and the Lantau Link were lower than those for Build, Operate and Transfer (BOT) projects in Hong Kong irrespective of whether the asset base was $21 billion or $11 billion. Furthermore, the "In-town Check-in" facilities would result in an estimated reduction in traffic flow of 1,000 vehicles per day. With overall estimates of 88,000 and 160,000 vehicles per day in 1998 and 2003 respectively, this would have minimal impact on the utilization of the Lantau Link.

3.Members considered it unfair to rely on the toll revenue of the Tsing Ma Bridge to support the management cost of other facilities in TMCA. DS for T explained that it was for practical transport operational reasons to collect toll for the Tsing Ma Bridge only as the siting of a second toll plaza at the Cheung Ching Tunnel or the Ting Kau Bridge might affect traffic flow on the Lantau Link. Furthermore, the current proposal would save costs associated with the construction and operation of a toll plaza and related facilities.

4.On the reason for using TMCA’s asset base of $21 billion for toll determination, the Deputy Secretary for the Treasury (DS for Tsy) explained that the whole TMCA was to be managed, operated and maintained as a single unit. If the Administration were to include only conventional tolled facilities such as bridges and tunnels in determining the asset base, it would have to conduct rigorous cost apportionment exercises in respect of these structures. He also advised that in an extensive study conducted in 1995, contracting-out was found to be the most cost effective approach to the management, operation and maintenance of TMCA. In order to achieve value for money, the Administration would award the management contract to an operator through competitive tendering. In response to members’ question on the mode of remuneration, DS for T clarified that remuneration for the operator would be an absolute amount instead of as a percentage of the toll collected.

5.DS for Tsy continued to explain the Administration’s long term financial objective. While no return on the Average Net Fixed Assets (ANFA) was anticipated in the first ten years, the Administration was satisfied that with a base toll of $30, a reasonable return on ANFA could be achieved after 20 years, and that there would also be a reasonable IRR. The current financial modelling was based on the assumption that the toll level would be revised every four or six years. In the short term, the Administration would need to open an advance account to remunerate the operator as the toll revenue would not be able to cover the operating cost in the first few years. The advance account would need to be cleared in accordance with the requirements of the Public Finance Ordinance and toll increases might need to be advanced in order to generate sufficient revenue for clearance of the account if a toll level lower than $30 was set. He emphasized that the toll income was the only source of revenue for TMCA and the implication of using other sources of Government’s income to support the operation of the area would need to be considered carefully.

6.Members disagreed that the mode of operation of the TMCA should be related to toll determination. They also pointed out inconsistencies in the Administration’s application of the "user-pays" principle. Users of most highways in Hong Kong, as well as users of facilities of TMCA other than the Lantau Link, were not charged. In the case of the TMCA, even though TMCA was a specific administrative area defined in law, it did not necessarily follow that the toll level should be based on the cost of the entire TMCA.

7.Hon LEE Wing-tat said that the Democratic Party would only accept the financial modelling with the asset base confined to the Tsing Ma Bridge, Kap Shui Mun Bridge and Ma Wan Viaduct, and Lantau Toll Plaza. The Party would object to any base toll of more than $20 for the Lantau Link in view of the high IRR and return on ANFA on this asset base. This view was echoed by Hon CHEUNG Hon-chung on behalf of the Democratic Alliance for the Betterment of Hong Kong.

Admin 8.The Chairman summarized that the toll levels for the Lantau Link proposed by the Administration were not fair to all users of TMCA, and that members were not convinced of the arguments presented by the Administration. Unless there were new arguments, it would not be fruitful to continue the discussion. Nevertheless, the Administration was requested to provide the following information for members’ reference:

  1. working on the premise of a reduced asset base of $11 billion, the estimated pay-back periods for different toll scenarios set out in Annex B of the information paper;
  2. the projected cashflow for 30 years showing Government’s income and expenditure in relation to the management, operation and maintenance of TMCA if the toll was less than $30; and
  3. working on the asset base of $11 billion, the toll levels which would enable the achievement of the target rate of return on ANFA, using the same performance periods as set out in Annex B of the information paper.

    (Post-meeting note: The information was circulated to members vide LegCo Paper No. CB(1) 1193/96-97 dated 3 April 1997.)

II.Any other business

9.There being no other business, the meeting ended at 5:30 p.m.

Legislative Council Secretariat

5 May 1997

Last Updated on 22 August 1998